Central and Eastern Europe is increasingly on the radar of digital nomads seeking new destinations. The countries they flock to see their markets impacted – for better or worse – with both opportunities and challenges aplenty. Babic & Partners Partner Marija Gregoric and JPM & Partners Partner Jelena Nikolic analyze these impacts.
Nomad Origins: Who’s Coming?
Digital nomads from around the globe are choosing CEE countries like Croatia, Serbia, and Montenegro for various reasons.
“According to information published by Croatian authorities, the most represented nations among applicants who successfully obtained the Digital Nomad Visa in Croatia are Russia (35%) and Ukraine (27%), distantly followed by USA (13%), UK, Australia, and Canada,” Gregoric begins. She notes that Croatia’s program “mostly attracts individuals fleeing from the armed conflict but still wishing to stay relatively close to their home.” Additionally, digital nomads are drawn to the “affordable living conditions, great geographic location, and the natural and cultural beauties offered by Croatia.”
Nikolic observes a similar trend in Serbia. “Digital nomads primarily come from Russia, the USA, Canada, and Great Britain. They often choose Serbia because of its hospitality, moderate climate, favorable living costs, safety, and rich cultural offerings,” she says. As for Montenegro, while official data is lacking, Nikolic mentions that there is an impression that people are mostly coming from “Asian and European countries.” Attractive factors include “lots of tourist attractions, impressive nature, a calming lifestyle, affordable living expenses, and favorable legal framework for business operations.”
Market Impact: Pros and Cons
In Croatia, “digital nomads represent only a small fraction of foreigners visiting Croatia and therefore have a relatively small impact on the Croatian market in general,” Gregoric notes.
In Serbia, “with the foreign currencies they bring and spend in the country, digital nomads influence the increase of foreign exchange reserves, GDP, and public revenues,” Nikolic reports. “They significantly influence the overall demand for housing, and subsequently lead to a rise in rental prices.” She goes on to add that “a large influx of digital nomads has pushed locals out, and co-working spaces have replaced local shops and working-class bars.”
On the flipside, in Montenegro, the impact is positive, with Nikolic highlighting “the opening of some new markets,” increased digitalization, and an increase in business activity spurred by new investments.
Visa Paths
In terms of the legal frameworks themselves, approaches to attracting digital nomads differ. Croatia is already ahead of the curve, having introduced the Digital Nomad Visa (DNV) in 2021. “Subject to different requirements, a third-country national intending to stay in Croatia for up to one year and work for a non-Croatian employer remotely, exclusively through means of IT communications, may be granted a DNV,” Gregoric explains.
Similarly, Montenegro has a framework in place – the Program for Attracting Digital Nomads by 2025. “The main goals are to develop a favorable environment for the stay of digital nomads and increase the recognition of Montenegro as an attractive destination,” Nikolic explains. “Montenegro has aligned all related regulations and has attracted a number of digital nomads since introducing it in 2022.”
On the other hand, Serbia has yet to officially recognize digital nomads. “All digital nomads must enter and reside in Serbia as regular tourists,” Nikolic says. Still, she does mention that new regulations are anticipated, “considering that digital nomads have become increasingly present in Serbia.”
Tax Breaks: Enticing Nomads
When it comes to attracting digital nomads, tax incentives appear to be crucial. In Croatia, Gregoric points out, “digital nomads being granted a DNV are exempt from paying income tax, as well as pension insurance and health insurance contributions throughout the validity of the DNV.” She contrasts this with neighboring countries, stating that “non-EU countries neighboring Croatia such as Serbia, or Bosnia and Herzegovina do not have any institutionalized program for digital nomads, whereas other countries in the region, such as Hungary, do offer a digital nomad visa but with fewer tax incentives.”
“Given that digital nomads haven’t been officially recognized in Serbia, there are still no tax incentives or breaks,” Nikolic explains, adding: “Digital nomads who reside in Serbia for a short period are not obliged to pay any taxes on their foreign income.” However, she cautions that “if they reside longer than 183 days, they become Serbian residents and therefore become taxpayers on personal income tax regarding income from foreign countries.”
In Montenegro, favorable tax policies are squarely in place. “A person who earns income from an employer not registered in Montenegro, based on the acquired digital nomad status in accordance with the law regulating the residence and work of foreigners, has a right to exemption from personal income tax,” Nikolic explains. She believes that, “this approach in Montenegro is very attractive” since digital nomads “face certainty in terms of their business and work.”
Limited Impact on Legislature
Digital nomads’ influence on the legal landscape of the countries they choose to stay in is limited but growing. “While remote workers have sparked some movement in legal adaptations, such as the introduction of the digital nomad visa and related tax and social security benefits, the actual influence of digital nomads on Croatia’s legal landscape remains quite limited due to their relatively small numbers,” Gregoric explains.
In Serbia, “digital nomads have only yet been noticed by the authorities as a category; however, Serbian legislation does not keep pace with changes in modern work models and therefore has not yet legally regulated their labor, tax, or social status,” Nikolic observes. For Montenegro, she notes that “there is not much impact”, as digital nomads are “mainly exempt from such regulations.”
Looking Ahead
Taking aim at the road ahead, both argue in favor of measures to attract more digital nomads while ensuring mutual benefits.
“We believe that the key measures to be considered for attracting more digital nomads in Croatia include streamlining visa applications by reducing documentation and speeding up approvals, adjusting the requirements to allow nomads to work with local clients, promoting cultural exchange, and implementing targeted marketing campaigns showcasing positive experiences,” Gregoric proposes for Croatia.
As for Serbia, Nikolic argues the country “should follow the example of Croatia and Montenegro, and legally define the term digital nomads, prescribe a digital nomad visa and residence regime that will enable them a longer stay, prescribe a one-stop-shop administration procedure for obtaining such visas and permits, and prescribe favorable tax regime and incentives.” For Montenegro, she posits that it is “the perfect destination for digital nomads with relaxed conditions to obtain digital nomad visas and there may be more promotion and marketing targeting digital nomads worldwide.” Still, she believes that space for some future improvements may be found in ensuring the possibility of applying for digital nomad visas electronically.
This article was originally published in Issue 11.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
